GlobeNewswire Inc | Mar 17, 2021 06:43AM EDT

March 17, 2021

Fourth Quarter results exceed previously updated guidanceGlobal eCommerce revenue increased 7.5% compared to the Fourth Quarter last yearGlobal new customers increased by 13.7% compared to the Fourth Quarter last yearInitiates Fiscal 2021 Outlook

DODGEVILLE, Wis., March 17, 2021 (GLOBE NEWSWIRE) -- Lands' End, Inc. (NASDAQ: LE) today announced financial results for the fourth quarter and fiscal year ended January 29, 2021 compared to the fourth quarter and fiscal year ended January 31, 2020.

Fiscal Fourth Quarter Financial Highlights:

-- For the fourth quarter, net revenue decreased 2.0% to $538.4 million, compared to $549.5 million in the fourth quarter last year. Excluding the approximately $40.0 million impact from the American Airlines launch from the prior year period, net revenue would have increased by 5.6%.Global eCommerce net revenue increased 7.5% for the fourth quarter, driven by Europe eCommerce increasing 38.0% and U.S. eCommerce growing 3.7% which included an increase in the total global buyer file by 5.0% with an increase of 13.7% in new customers.Third Party net revenue, which includes U.S. wholesale revenues and sales on third party marketplaces, increased to $21.3 million, a 298.2% increase as compared to the fourth quarter last year.Outfitters net revenue declined 54.2% to $43.0 million due in part to the lapping of the American Airlines launch in the fourth quarter of 2019. Excluding the impact from the American Airlines launch, net revenue would have decreased 20.8% due to decreased customer demand from the COVID-19 pandemic.

-- Gross margin decreased approximately 30 basis points to 39.5% as compared to 39.8% in the fourth quarter last year. Gross margin declined due to increased shipping costs and surcharges, as well as sales mix from the Third Party business, largely offset by improved promotional strategies and continued use of data analytics. -- Selling and administrative expenses decreased $2.7 million to $166.7 million or 31.0% of net revenue, compared to $169.4 million or 30.8% of net revenue, in the fourth quarter of last year. The 20 basis point increase was driven by the deleverage from the American Airlines launch partially offset by strong controls of operating expenses and structural costs. -- Net income was $19.9 million or $0.60 per diluted share, as compared to net income of $25.5 million or $0.78 per diluted share in the fourth quarter of fiscal 2019. -- Adjusted EBITDA decreased 6.5% to $46.1 million in the fourth quarter of fiscal 2020 compared to $49.3 million in the fourth quarter of fiscal 2019.

Jerome Griffith, Chief Executive Officer, stated, The strength and resilience of our business model as well as the diligence and endurance of our teams was clearly demonstrated over the past year. From the onset of the pandemic, we moved swiftly to protect our business while at the same time maintaining our focus on the execution of our strategic pillars. We were well positioned to capitalize on the accelerated shift to online as a digitally-led company and we benefited from the investments we made to advance our competitive strengths. This enabled us to drive high-single digit growth in our global eCommerce sales and double-digit growth in Adjusted EBITDA in Fiscal 2020. Looking ahead, we remain excited about the significant growth opportunity that lies ahead as we further advance our initiatives and continue to adapt to the changing consumer environment. With a strong foundation largely in place, we are confident that Lands End will thrive in this digital-first environment.

Fiscal Full Year Financial Highlights:

-- For the fiscal year, net revenue decreased 1.6% to $1.43 billion compared to $1.45 billion in the prior year. Excluding the approximately $36.0 million net impact from the American Airlines launch, net revenue would have increased by 0.9%. Global eCommerce net revenue increased 8.6% for fiscal year, driven by U.S. eCommerce increasing 5.7% and Europe eCommerce growing 29.7%.Third Party net revenue increased 192.6% with the launch of the Kohls business in the third quarter of 2020.Outfitters net revenue declined 39.0%. Excluding the impact from the American Airlines launch, net revenue would have decreased 30.7%. -- Gross margin decreased approximately 50 basis points to 42.4% compared to 42.9% in fiscal 2019. Gross margin declined due to increased shipping costs and surcharges, partially offset by improved promotional strategies and continued use of data analytics. -- Selling and administrative expenses decreased $25.1 million and 110 basis points to $518.9 million or 36.4% of net revenue, compared to $544.0 million or 37.5% of net revenue, in fiscal 2019. -- Net income was $10.8 million, or $0.33 earnings per diluted share. This compares to Net income of $19.3 million or $0.60 earnings per diluted share in fiscal 2019. -- Adjusted EBITDA grew by 11.6% to $87.0 million compared to $77.9 million in fiscal 2019.

Full Year Fiscal 2020 Business Highlights:

-- Increased the total global buyer file by 6.1% with an increase of 20.6% in new customers driven by data-driven initiatives in analytics, eCommerce technology and marketing combined with a comfort-oriented product assortment. -- Successfully launched Lands End product on Kohls.com and in 150 Kohls stores on September 30, 2020. Based on strong early results, the Company plans to expand the Lands End assortment and increase the number of points of distribution to 300 Kohls stores in 2021. -- Completed the refinancing of the Companys debt facilities with the closing of a $275.0 million term loan facility on September 9, 2020 and an increase in its revolving asset-based senior secured credit facility from $175.0 million to a maximum of $275.0 million in borrowings.

Balance Sheet and Cash Flow Highlights

Cash and cash equivalents were $33.9 million as of January 29, 2021, compared to $77.1 million as of January 31, 2020.

Net cash provided by operations was $91.6 million for the 52 weeks ended January 29, 2021, compared to $27.3 million for the 52 weeks ended January 31, 2020.

Inventories, net, was $382.1 million as of January 29, 2021, and $375.7 million as of January 31, 2020.

As of January 29, 2021 the Company had $25.0 million of borrowings outstanding and $223.0 million of availability under its asset-based senior secured credit facility. Additionally, as of January 29, 2021, the Company had $271.6 million of term loan debt outstanding compared to $385.4 million of term loan debt outstanding at the end of last year.

Outlook

Jim Gooch, President and Chief Financial Officer, stated, We ended the year with a healthy balance sheet reflecting strong free cash flow generation as well as disciplined capital management. As we look ahead, we will maintain our focus on driving continued momentum in our global eCommerce business, progressing the recovery of our Outfitters business and further advancing our third-party and marketplace growth strategies. The investments we have made in our business, combined with the continued execution of our strategies, positions us to deliver sustainable long-term growth and drive increased shareholder value.

For the first quarter of fiscal 2021 the Company expects:

-- Net revenue to be between $275 million and $285 million. -- Net loss to be between $10.5 million and $8.0 million, and diluted loss per share to be between $0.32 and $0.25. -- Adjusted EBITDA in the range of $4.0 million to $7.0 million.

For the first half of fiscal 2021 the Company expects:

-- Net revenue to be between $600 million and $620 million. -- Net loss to be between $16.5 million and $11.5 million, and diluted loss per share to be between $0.50 and $0.36. -- Adjusted EBITDA in the range of $14.0 million to $20.0 million.

For fiscal 2021 the Company expects:

-- Net revenue to be between $1.52 billion and $1.57 billion. -- Net income to be between $11.0 million and $19.0 million, and diluted earnings per share to be between $0.34 and $0.58. -- Adjusted EBITDA in the range of $88.0 million to $98.0 million. -- Capital Expenditures of approximately $26.0 million.

Conference Call

The Company will host a conference call on Wednesday, March 17, 2021, at 8:30 a.m. ET to review its fourth quarter and full year financial results and related matters. The call may be accessed through the Investor Relations section of the Company's website at http://investors.landsend.com or by dialing (866) 753-5836.

About Lands' End, Inc.

Lands' End, Inc. (NASDAQ:LE) is a leading uni-channel retailer of casual clothing, accessories, footwear and home products. We offer products online at www.landsend.com, on third party online marketplaces and through our own Company Operated stores, as well as, third-party retail locations. We are a classic American lifestyle brand with a passion for quality, legendary service and real value, and seek to deliver timeless style for women, men, kids and the home.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding the Companys growth opportunity as it advances its initiatives and adapts to the changing consumer environment; the Companys prospects in a digital-first environment; plans to expand the assortment of Lands End products available in Kohls and the number of Kohls stores carrying Lands End product; the Companys focus on driving continued momentum in its global eCommerce business, progressing the recovery of the Outfitters business and further advancing its third-party and marketplace growth strategies; the Companys assessment of its ability to execute its long-term growth strategies and the expected benefits of those strategies; the Companys prospects for sustainable long-term growth and ability to drive increased shareholder value; and the Companys outlook and expectations as to net revenue, net income, earnings per share and Adjusted EBITDA for the first quarter, the first half and the full fiscal year 2021 and estimated capital expenditures for the fiscal year 2021. The following important factors and uncertainties, among others, could cause actual results to differ materially from those described in these forward-looking statements: the impact of COVID-19 on operations, customer demand and the Companys supply chain, as well as its consolidated results of operation, financial position and cash flows; the Company may be unsuccessful in implementing its strategic initiatives, or its initiatives may not have their desired impact on its business; the Companys ability to offer merchandise and services that customers want to purchase; changes in customer preference from the Companys branded merchandise; the Companys results may be materially impacted if tariffs on imports to the United States increase and it is unable to offset the increased costs from current or future tariffs through pricing negotiations with its vendor base, moving production out of countries impacted by the tariffs, passing through a portion of the cost increases to the customer, or other savings opportunities; customers' use of the Companys digital platform, including customer acceptance of its efforts to enhance its eCommerce websites, including the Outfitters website; customer response to the Companys marketing efforts across all types of media; the Companys maintenance of a robust customer list; the Companys retail store strategy may be unsuccessful; the Companys relationship with Kohls may not develop as planned or have its desired impact; the Companys dependence on information technology and a failure of information technology systems, including with respect to its eCommerce operations, or an inability to upgrade or adapt its systems; fluctuations and increases in costs of raw materials; impairment of the Companys relationships with its vendors; the Companys failure to maintain the security of customer, employee or company information; the Companys failure to compete effectively in the apparel industry; legal, regulatory, economic and political risks associated with international trade and those markets in which the Company conducts business and sources its merchandise; the Companys failure to protect or preserve the image of its brands and its intellectual property rights; increases in postage, paper and printing costs; failure by third parties who provide the Company with services in connection with certain aspects of its business to perform their obligations; the Companys failure to timely and effectively obtain shipments of products from its vendors and deliver merchandise to its customers; reliance on promotions and markdowns to encourage customer purchases; the Companys failure to efficiently manage inventory levels; unseasonal or severe weather conditions; the adverse effect on the Companys reputation if its independent vendors do not use ethical business practices or comply with applicable laws and regulations; assessments for additional state taxes; incurrence of charges due to impairment of goodwill, other intangible assets and long-lived assets; the impact on the Companys business of adverse worldwide economic and market conditions, including economic factors that negatively impact consumer spending on discretionary items; potential indemnification liabilities to Sears Holdings pursuant to the separation and distribution agreement in connection with the Companys separation from Sears Holdings; the ability of the Companys principal shareholders to exert substantial influence over the Company; potential liabilities under fraudulent conveyance and transfer laws and legal capital requirements; and other risks, uncertainties and factors discussed in the "Risk Factors" section of the Companys Annual Report on Form 10-K for the fiscal year ended January 31, 2020, and subsequent Quarterly Reports on Form 10-Q, as well as in the Companys Current Report on Form 8-K dated June 2, 2020. The Company intends the forward-looking statements to speak only as of the time made and does not undertake to update or revise them as more information becomes available, except as required by law.

CONTACTS

Lands' End, Inc. James Gooch President and Chief Financial Officer (608) 935-9341

Investor Relations: ICR, Inc. Jean Fontana (646) 277-1214 Jean.Fontana@icrinc.com

LANDS END, INC.Condensed Consolidated Balance Sheets(Unaudited)

(in thousands except per share data) January 29, January 31, 2021 2020ASSETS Current assets Cash and cash equivalents $ 33,933 $ 77,148 Restricted cash 1,861 2,149 Accounts receivable, net 37,574 50,953 Inventories, net 382,106 375,670 Prepaid expenses and other current assets 40,356 39,458 Total current assets 495,830 545,378 Property and equipment, net 145,288 157,665 Operating lease right-of-use asset 35,475 38,665 Goodwill 106,700 110,000 Intangible asset, net 257,000 257,000 Other assets 5,215 4,921 TOTAL ASSETS $ 1,045,508 $ 1,113,629 LIABILITIES AND STOCKHOLDERS? EQUITY Current liabilities Current portion of long-term debt $ 13,750 $ 5,150 Accounts payable 134,007 158,436 Lease liability - current 5,183 5,864 Other current liabilities 161,982 114,116 Total current liabilities 314,922 283,566 Long-term borrowings on ABL Facility 25,000 ? Long-term debt, net 245,632 378,657 Lease liability - long-term 37,811 39,841 Deferred tax liabilities 47,346 57,651 Other liabilities 5,094 5,532 TOTAL LIABILITIES 675,805 765,247 Commitments and contingencies STOCKHOLDERS' EQUITY Common stock, par value $0.01 - authorized:480,000 shares; issued 326 324 and outstanding: 32,614 and 32,382,respectivelyAdditional paid-in capital 369,372 360,656 Retained earnings 11,226 390 Accumulated other comprehensive loss (11,221 ) (12,988 )TOTAL STOCKHOLDERS' EQUITY 369,703 348,382 TOTAL LIABILITIES AND STOCKHOLDERS? EQUITY $ 1,045,508 $ 1,113,629

LANDS END, INC.Condensed Consolidated Statements of Operations(Unaudited)

13 Weeks 13 Weeks 52 Weeks 52 Weeks Ended Ended Ended Ended(in thousands January January January 29, January 31,except per 29, 2021 31, 2020 2021 2020 share data)REVENUES Net revenue $ 538,374 $ 549,478 $ 1,427,448 $ 1,450,201 Cost of sales(excludingdepreciation 325,554 330,720 821,595 828,309 andamortization)Gross profit 212,820 218,758 605,853 621,892 Selling and 166,733 169,442 518,897 543,962 administrativeDepreciationand 9,552 8,035 37,343 31,136 amortizationOtheroperating 556 1,454 8,471 1,357 expense, netTotal costs 176,841 178,931 564,711 576,455 and expensesOperating 35,979 39,827 41,142 45,437 incomeInterest 8,522 5,798 27,754 25,987 expenseOther (income) (113 ) (273 ) 796 (1,912 )expense, net Income before 27,570 34,302 12,592 21,362 income taxesIncome tax 7,643 8,786 1,756 2,072 expenseNET INCOME $ 19,927 $ 25,516 $ 10,836 $ 19,290 NET INCOME PERCOMMON SHAREATTRIBUTABLE TOSTOCKHOLDERSBasic: $ 0.61 $ 0.79 $ 0.33 $ 0.60 Diluted: $ 0.60 $ 0.78 $ 0.33 $ 0.60 Basic weightedaverage common 32,611 32,374 32,566 32,343 sharesoutstandingDilutedweightedaverage common 33,471 32,508 32,652 32,345 sharesoutstanding

Use and Definition of Non-GAAP Financial Measures

Adjusted EBITDA - In addition to our Net income, for purposes of evaluating operating performance, we use an Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA"), which is adjusted to exclude certain significant items as set forth below. Our management uses Adjusted EBITDA to evaluate the operating performance of our business, as well as for executive compensation metrics, for comparable periods. Adjusted EBITDA should not be used by investors or other third parties as the sole basis for formulating investment decisions as it excludes several important cash and non-cash recurring items.

The methods used by the Company to calculate its non-GAAP financial measures may differ significantly from methods used by other companies to compute similar measures. As a result, any non-GAAP financial measures presented herein may not be comparable to similar measures provided by other companies.

While Adjusted EBITDA is a non-GAAP measurement, management believes that it is an important indicator of operating performance, and useful to investors, because:

-- EBITDA excludes the effects of financings, investing activities and tax structure by eliminating the effects of interest, depreciation and income tax. -- Other significant items, while periodically affecting our results, may vary significantly from period to period and have a disproportionate effect in a given period, which affects comparability of results. We have adjusted our results for these items to make our statements more comparable and therefore more useful to investors as the items are not representative of our ongoing operations. For the 13 weeks and 52 weeks ended January 29, 2021 and January 31, 2020 we excluded the impacts of corporate restructuring which includes severance for the reduction in corporate staff in the second quarter of fiscal 2020 and closure of school uniform showrooms in Fiscal 2019.For the 13 weeks and 52 weeks ended January 29, 2021 and January 31, 2020 we excluded the impacts of impairment including goodwill impairment and non-cash write down of certain long-lived assets.For the 13 weeks and 52 weeks ended January 29, 2021 and January 31, 2020 we excluded the impacts of gain or loss on property and equipment as management considers the gains or losses on asset valuation to result from investing decisions rather than ongoing operations.

Reconciliation of Non-GAAP Financial Information to GAAP(Unaudited)

13 Weeks Ended 13 Weeks Ended January 29, 2021 January 31, 2020 (in thousands) $?s % of Net $?s % of Net Sales SalesNet income $ 19,927 3.7 % $ 25,516 4.6 %Income tax expense 7,643 1.4 % 8,786 1.6 %Other income, net (113 ) (0.0 ) (273 ) (0.0 ) % %Interest expense 8,522 1.6 % 5,798 1.1 %Operating income 35,979 6.7 % 39,827 7.2 %Depreciation and 9,552 1.8 % 8,035 1.5 %amortizationOther operating expense 250 0.0 % ? ? %Corporate restructuring ? ? % 357 0.1 %Goodwill and long-lived ? ? % 1,365 0.2 %asset impairmentLoss (gain) on disposal of 306 0.1 % (268 ) (0.0 )property and equipment %Adjusted EBITDA $ 46,087 8.6 % $ 49,316 9.0 %

52 Weeks Ended 52 Weeks Ended January 29, 2021 January 31, 2020 (in thousands) $?s % of Net $?s % of Net Sales SalesNet income $ 10,836 0.8 % $ 19,290 1.3 %Income tax expense 1,756 0.1 % 2,072 0.1 %Other expense (income), 796 0.1 % (1,912 ) (0.1 )net %Interest expense 27,754 1.9 % 25,987 1.8 %Operating income 41,142 2.9 % 45,437 3.1 %Depreciation and 37,343 2.6 % 31,136 2.1 %amortizationOther operating expense 383 0.0 % ? ? %Corporate restructuring 2,941 0.2 % 258 0.0 %Goodwill and long-lived 3,844 0.3 % 1,365 0.1 %asset impairmentLoss (gain) on disposal of 1,303 0.1 % (266 ) (0.0 )property and equipment %Adjusted EBITDA $ 86,956 6.1 % $ 77,930 5.4 %

First Quarter Fiscal 2021 Guidance 13 Weeks Ended(in millions) April 30, 2021Net loss $ 10.5 - $ 8.0Depreciation, interest, other income, taxes and other 14.5 - 15.0adjustmentsAdjusted EBITDA $ 4.0 - $ 7.0

First Half Fiscal 2021 Guidance 13 Weeks Ended(in millions) July 30, 2021Net loss $ 16.5 - $ 11.5Depreciation, interest, other income, taxes and other 30.5 - 31.5adjustmentsAdjusted EBITDA $ 14.0 - $ 20.0

Fiscal 2021 Guidance 52 Weeks Ended(in millions) January 28, 2022Net income $ 11.0 - $ 19.0Depreciation, interest, other income, taxes and other 77.0 - 79.0adjustmentsAdjusted EBITDA $ 88.0 - $ 98.0

LANDS END, INC.Condensed Consolidated Statements of Cash Flows(Unaudited)

52 weeks ended (in thousands) 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIES Net income 10,836 $ 19,290 Adjustments to reconcile net income to net cashprovided by operating activities:Depreciation and amortization 37,343 31,136 Amortization of debt issuance costs 3,110 1,722 Loss (gain) on disposal of property and equipment 1,303 (266 )Stock-based compensation 9,201 8,690 Deferred income taxes (10,770 ) (456 )Goodwill impairment 3,300 ? Other 1,852 1,635 Change in operating assets and liabilities: Accounts receivable, net 15,012 (13,741 )Inventories (4,081 ) (53,819 )Accounts payable (21,208 ) 32,716 Other operating assets (376 ) (3,167 )Other operating liabilities 46,111 3,549 Net cash provided by operating activities 91,633 27,289 CASH FLOWS FROM INVESTING ACTIVITIES Sales of property and equipment ? 906 Purchases of property and equipment (30,149 ) (38,878 )Net cash used in investing activities (30,149 ) (37,972 )CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings under ABL Facility 235,000 99,550 Payments of borrowings under ABL Facility (210,000 ) (99,550 )Proceeds from issuance of term loan 266,750 ? Payments on term loan (388,825 ) (105,150 )Payments of employee withholding taxes on (483 ) (763 )share-based compensationPayment of debt issuance costs (5,517 ) ? Net cash used in financing activities (103,075 ) (105,913 )Effects of exchange rate changes on cash, cashequivalents (1,912 ) 540 and restricted cashNET DECREASE IN CASH, CASH EQUIVALENTS AND (43,503 ) (116,056 )RESTRICTED CASHCASH, CASH EQUIVALENTS AND RESTRICTED CASH, 79,297 195,353 BEGINNING OF YEARCASH, CASH EQUIVALENTS AND RESTRICTED CASH, $ 35,794 $ 79,297 END OF YEARSUPPLEMENTAL CASH FLOW DATA Unpaid liability to acquire property and equipment $ 3,245 $ 7,364 Income taxes paid, net of refunds $ 288 $ 3,069 Interest paid $ 21,595 $ 23,728